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2017 (3) TMI 1318 - ITAT COCHINRevision u/s 263 - Applicability of section 11(4) - disallowance of provision for gratuity - Held that:- In the instant case, the assessee is running a hospital and medical college, both of which fall under the terms ‘charity’ within the definition of charitable purposes as defined in section 2(15) of the I T Act. Section 11(4) is attracted only in a situation where the “property held under trust” includes a “business undertaking”. Since the assessee is not having any ‘business undertaking’, section 11(4) will not be attracted to the facts and circumstances of the case. Hence, the CIT erred in invoking the provisions of section 11(4) of the I T Act. Sub-section (4) of section 11 can be invoked only if the income determined by the Assessing Officer is in excess of the income as shown in the accounts of the undertaking. Any disallowance of expenditure is not hit by subsection 4 of section 11. Section 11 (4) is attracted only in a situation where the income determined by the Assessing Officer is in excess of the income as shown in the accounts of the undertaking; i e; only if there any income which is hidden from the books of accounts. In assessee’s case, issue in question is disallowance of provision for gratuity. The provision for gratuity has already disclosed in the books of account. The total income to be determined even after disallowance of provision for gratuity is Nil. Disallowance of provision for gratuity will not result in a situation where income determined by the Assessing Officer is in excess of the income as shown in the accounts of the assessee. Commissioner of Income Tax has erred in invoking section 263 since the order passed by the Assessing Officer u/s 143(3) was not prejudicial to the interest of the revenue. In the return of income, the assessee had declared total income at Nil. Even after disallowance or provision for gratuity, the total income is Nil as there is already excess utilization or ₹ 16.32 crorcs. Hence, the order passed by the Assessing Officer cannot be said to be prejudicial to the interest or the revenue. - Decided in favour of assessee
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